Investors in Woodbridge upon the recommendation of former financial advisor Joel Vincent Flaningan (“Flaningan”) (CRD# 5664958) may be able to recover their losses in FINRA arbitration. According to FINRA BrokerCheck, Mr. Flaningan was discharged from employment with NYLife Securities LLC (“NYLife”) (CRD# 5167) on or about May 10, 2018, in connection with “allegations he was involved in the solicitation of New York Life (“NYL”) clients to invest in an unregistered entity named Woodbridge Mortgage Investment Fund… Mr. Flaningan failed to disclose any involvement with Woodbridge to NYL.” Furthermore, publicly available information via BrokerCheck indicates that Mr. Flaningan is currently the subject of one customer dispute concerning allegations that he purportedly failed to disclose the material risks “associated with an unregistered investment in Woodbridge… .”

According to BrokerCheck, NYLife has disavowed any prior knowledge of Mr. Flaningan’s business activity conducted away from the firm in selling purportedly non-approved Woodbridge investments. However, sales of unregistered securities by a financial advisor who engages in such “selling away” activity while still affiliated with his or her brokerage firm may result in the broker-dealer (such as NYLife) being held vicariously liable for the negligence and/or misconduct of its registered representative.

As recently reported, the Woodbridge Group of Companies, LLC (“Woodbridge”) of Sherman Oaks, CA, and certain of its affiliated entities, filed for Chapter 11 bankruptcy protection on December 4, 2017 (U.S. Bankruptcy Court for the District of Delaware – Case No. 17-12560-KJC). The SEC has alleged that Woodbridge, through its owner and former CEO, Mr. Robert Shapiro, purportedly utilized “more than 275 Limited Liability Companies to conduct a massive Ponzi scheme raising more than $1.22 billion from over 8,400 unsuspecting investors nationwide through fraudulent unregistered securities offerings.”

Beginning as early as 2012, Woodbridge and its affiliates offered securities nationwide to numerous retail investors through a network of in-house promoters, as well as various licensed and unlicensed financial advisors. Woodbridge investments came in two primary forms: (1) “Units” that consisted of subscriptions agreements for the purchase of an equity interest in one of Woodbridge’s seven Delaware limited liability companies, and (2) “Notes” or what have commonly been referred to as “First Position Commercial Mortgages” or “FPCMs” consisting of lending agreements underlying purported hard money loans on real estate deals.

Brokerage firms like NYLife have a duty to ensure that their registered representatives are adequately supervised. Consequently, brokerage firms must take reasonable steps to ensure that their brokers follow all applicable securities rules and regulations, as well as adhere to the firm’s internal policies and procedures. In those instances when brokerage firms fail to adequately supervise their registered representatives, they may be held liable for losses sustained by investors.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience representing investors in disputes involving broker misconduct, including selling away claims often associated with risky and illiquid unregistered securities. Investors may contact a securities arbitration attorney by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation.

If you invested in a Woodbridge promissory note(s) upon the recommendation of broker Peter David Holler (CRD# 838897), you may be able to recover your losses through securities arbitration before FINRA. As disclosed by FINRA on May 21, 2018, registered representative Peter Holler has been suspended from the securities industry for a period of two years. From 2001 through August 2017, Mr. Holler was affiliated with Securities Service Network, LLC (BD No. 13318) (“SSN”) in their Bristol, TN office. FINRA BrokerCheck indicates that Mr. Holler was discharged from his employment with SSN on or about August 10, 2017 due to his alleged participation in “unapproved and undisclosed outside business activity…”

Pursuant to a Letter of Acceptance, Waiver, and Consent (“AWC”), through which Mr. Holler neither admitted or denied FINRA Enforcement’s findings, he accepted both the two-year suspension, as well as monetary penalties including a $10,000 fine and disgorgement of $49,790 in commissions received through the sale of unregistered Woodbridge securities to various investors. As encapsulated in the May 2018 AWC, Mr. Holler purportedly violated FINRA Rule 3280(b), an industry rule that prohibits brokers from participating in private securities transactions, without first providing written notice to their employer firm. Such written notice must set forth in detail the proposed transaction, as well as the financial advisor’s proposed role with regard to the contemplated transaction and whether he or she will receive any compensation in connection with the transaction.

According to FINRA Enforcement’s findings, from September 2016 – August 2017, Mr. Holler solicited various investors to purchase unregistered securities in certain Woodbridge Mortgage Investment Funds as offered through the Woodbridge Group of Companies (“Woodbridge”) of Sherman Oaks, CA. Further, FINRA Enforcement determined that Mr. Holler sold approximately $1.4 million in Woodbridge promissory notes to some 19 individuals, 9 of whom were SSN customers. In derogation of FINRA Rule 3280, Mr. Holler purportedly did not provide SSN with prior written notification of these private securities transactions.

As has been alleged by the SEC, Woodbridge and its owner and former CEO, Mr. Robert Shapiro, purportedly “used his web of more than 275 Limited Liability Companies to conduct a massive Ponzi scheme raising more than $1.22 billion from over 8,400 unsuspecting investors nationwide through fraudulent unregistered securities offerings.” According to Steven Peiken, Co-Director of the SEC’s Enforcement Division, the Woodbridge “[b]usiness model was a sham. The only way that Woodbridge was able to pay investors their dividends and interest payments was through the constant infusion of new investor money.”

Irrespective of whether Mr. Holler’s alleged outside business activity was conducted without his employer’s knowledge, brokerage firms like Securities Service Network nonetheless have a duty to ensure that their registered representatives are adequately supervised. As such, brokerage firms must take reasonable steps to ensure that their brokers follow all applicable securities rules and regulations, as well as adhere to the firm’s internal policies and procedures. In instances when brokerage firms fail to adequately supervise their financial advisors, they may be held liable for losses sustained by investors.

Attorneys at Law Office of Christopher J. Gray, P.C. have significant experience representing investors in disputes involving broker misconduct, including claims against broker-dealers for their failure to supervise. Investors may contact a securities arbitration attorney via the contact form on this website, by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation.

If you invested in Woodbridge upon the recommendation of former financial advisor Frank Roland Dietrich (“Dietrich”), you may be able to recover your losses in arbitration before the Financial Industry Regulatory Authority (“FINRA”). According to FINRA BrokerCheck, a number of investors have already filed claims against Mr. Dietrich and his former employer, broker-dealer Quest Capital Strategies, Inc. (“Quest Capital”) (CRD# 16783). Publicly available information suggests that Quest Capital has disavowed any prior knowledge of Mr. Dietrich’s alleged business activity conducted away form the firm in selling purportedly non-approved Woodbridge investments. Nevertheless, Mr. Dietrich’s alleged “selling away” activity, to the extent it may have occurred while he was still affiliated with Quest Capital, may give rise to Quest Capital being held vicariously liable for the negligence and/or misconduct of its former employee.

As recently reported, the Woodbridge Group of Companies, LLC (“Woodbridge”) of Sherman Oaks, CA, and certain of its affiliated entities, filed for Chapter 11 bankruptcy protection on December 4, 2017 (U.S. Bankruptcy Court for the District of Delaware – Case No. 17-12560-KJC). The SEC has alleged that Woodbridge, through its owner and former CEO, Mr. Robert Shapiro, purportedly utilized “more than 275 Limited Liability Companies to conduct a massive Ponzi scheme raising more than $1.22 billion from over 8,400 unsuspecting investors nationwide through fraudulent unregistered securities offerings.”

Beginning as early as 2012, Woodbridge and its affiliates offered securities nationwide to numerous retail investors through a network of in-house promoters, as well as various licensed and unlicensed financial advisors. Woodbridge investments came in two primary forms: (1) “Units” that consisted of subscriptions agreements for the purchase of an equity interest in one of Woodbridge’s seven Delaware limited liability companies, and (2) “Notes” or what have commonly been referred to as “First Position Commercial Mortgages” or “FPCMs” consisting of lending agreements underlying purported hard money loans on real estate deals.

Brokerage firms like Quest Capital have a duty to ensure that their registered representatives are adequately supervised. Consequently, brokerage firms must take reasonable steps to ensure that their brokers follow all applicable securities rules and regulations, as well as adhere to the firm’s internal policies and procedures. In those instances when brokerage firms fail to adequately supervise their registered representatives, they may be held liable for losses sustained by investors.

In the event that a financial advisor wishes to consummate a private securities transaction, then he or she must first provide the firm with prior written notice, detailing the contemplated transaction. Such a transaction must first be approved by the firm. If such a transaction is not approved by the firm, then the broker cannot participate in the transaction. In instances where a broker fails to notify the firm of the contemplated transaction, in the first instance, or proceeds with an unauthorized transaction in derogation of the firm’s directive to the contrary, then selling away has occurred, in direct violation of FINRA Rule 3280.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience representing investors in disputes involving broker misconduct, including selling away claims, in addition to claims against brokerage firms for their failure to supervise. Investors may contact a securities arbitration attorney via the contact form on this website, by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation.

As we have detailed in numerous blog posts, the Woodbridge Group of Companies, LLC (“Woodbridge”) and certain of its affiliated entities filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware (Case No. 17-12560-KJC) on December 4, 2017. From the outset of this Chapter 11 proceeding, investors in Woodbridge Notes (“Noteholders”) have taken the position that they hold secured, perfected liens in various real estate deals.

By way of background, beginning as early as July 2012, Woodbridge and its affiliates offered securities nationwide to investors in at least two forms: (1) subscription agreements for the purchase of equity interests or units in one of Woodbridge’s seven Delaware limited liability companies (“Units”); and, (2) lending agreements, some of which were referred to as “First Position Commercial Mortgage Notes,” “mezzanine loans,” “construction loans,” and “Co-Lending Opportunities” (collectively, “FPCMs”).

On March 27, 2018, the Debtors, the Unsecured Creditors Committee and the Ad Hoc Noteholders Committee all agreed on a plan of reorganization that was encapsulated in a Term Sheet filed with the Bankruptcy Court. However, the Term Sheet failed to address whether or not Woodbridge Noteholders who invested in FPCMs do, in fact, hold secured, perfected liens. Accordingly, on March 27^th a Woodbridge FPCM investor – retired 85 year old attorney Lisa La Rochelle – filed an adversary proceeding (the “Owlwood Complaint”) in an effort to resolve the looming question of whether some $800 million in FPCMs should be treated as secured debt for purposes of disposition of the Chapter 11 proceeding.

In opposition to the Debtors and Creditors’ Committees’ stance that Noteholders are unsecured because they neither hold the original promissory note on their collateral, nor do they possess filed UCC-1 financing statements, Ms. La Rochelle has argued that a California statute offers protection to Noteholders. Specifically, the Owlwood Complaint relies upon Section 10233.2 of the California Business and Professional Code, as interpreted by the 9^th Circuit Court of Appeals in In Re: First T.D. Investment, Inc., 253 F.3d 520 (9^th Cir. 2001). Under the holding of In Re FTD, Section 10233.2 is recognized as a consumer protection statute that enumerates certain requirements that will establish perfection, absent holding the underlying note or a filed UCC-1, as is the case with numerous Woodbridge Noteholders.

To begin, the borrower needs to be acting as a broker within the meaning of Section 10131 or 10131.1 of the California Business and Professional Code. Pursuant to 10131.1, the term real estate broker is defined as “a person who engages as a principal in the business of making loans or buying from, selling to, or exchanging with the public, real property sales contracts or promissory notes secured directly or collaterally by liens on real property, or who makes agreements with the public for the collection of payments or for the performance of services in connection with real property sales contracts or promissory notes secured directly or collaterally by liens on real property.”

Second, the statute mandates that the real estate broker has to have “…arranged a loan or sold a promissory note or any interest therein, and thereafter undertakes to service the promissory note on behalf of the lender or purchaser in accordance with Section 10233…” It is worth noting that the Ninth Circuit in In Re FTD used a very broad definition of “sold.” Third, the statute contemplates that the real estate broker undertakes to service the promissory note on behalf of the lender. In the Owlwood Complaint, Ms. La Rochelle has argued that Woodbridge was clearly servicing the note between the respective investment fund and the property company within the meaning of Section 10233. The Secured Noteholders received direct communications and checks from the Woodbridge Group. Further, the Secured Noteholders received monthly interest payments and statements from the Debtors.

Through Ms. La Rochelle’s Motion papers and the supporting Owlwood Complaint, Woodbridge Noteholders seek to terminate the Debtors’ exclusive period and be afforded the right to file their own completing plan of reorganization. As argued by Ms. La Rochelle:

“… this Court should allow the Secured Noteholders to explore filing their own plan. It is clear that certain California properties such as Owlwood hold the greatest value in this case and may provide a basis for significant recovery. To deny California noteholders the right to realize on their specific collateral, which they relied on at the outset when making the investment decision, would be a miscarriage of justice.”

Investors in Woodbridge FPCMs, Units and other securities may be able to recover investment losses through arbitration or litigation. Investors may contact a securities arbitration attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

As highlighted in our previous blog posts concerning the Woodbridge Group of Companies (“Woodbridge”) of Sherman Oaks, CA, Woodbridge filed for Chapter 11 bankruptcy on December 4, 2017, in Delaware Bankruptcy Court (Case No. 17-12560-KJC). Thereafter, on December 21^st, the Securities and Exchange Commission (“SEC”) formally filed charges against Woodbridge and its owner and former CEO, Robert Shapiro, alleging that “[D]efendant… used his web of more than 275 Limited Liability Companies to conduct a massive Ponzi scheme raising more than $1.22 billion from over 8,400 unsuspecting investors nationwide through fraudulent unregistered securities offerings.”

By January 2, 2018, the SEC further alleged, among other things, that the timing of the Chapter 11 proceeding called into question whether Mr. Shapiro had preemptively sought bankruptcy protection, in the first instance, in order to shield himself from impending charges of misconduct, and sought appointment of an independent trustee.

On January 23, the SEC announced a resolution under which the Bankruptcy Court for the District of Delaware approved a settlement Term Sheet, calling for the appointment of a new Board of Managers consisting of representatives recommended by the parties which will take necessary actions for managing Woodbridge, with the first course of action to be selecting a CEO or Chief Restructuring Officer for the Debtors. The Term Sheet also calls for the formation and appointment of Unitholders and Noteholders committees to represent the interests of investors who purchased Woodbridge notes and unit investments.

Investors who purchased Woodbridge First Position Commercial Mortgages (“FPCMs”) or a five-year private placement security (“Fund Offerings” or “Units”) through a stockbroker or financial advisor may have viable litigation or FINRA arbitration claims if the brokerage firm or Registered Investment Advisor (“RIA”) did not perform adequate due diligence before recommending the Woodbridge investment.

Some of the issuers of Woodbridge securities include the following entities:

• WMF Management, LLC (“WMF”);
• Woodbridge Group of Companies, LLC (d/b/a Woodbridge Wealth);
• Woodbridge Mortgage Investment Fund 1, LLC;
• Woodbridge Mortgage Investment Fund 2, LLC;
• Woodbridge Mortgage Investment Fund 3, LLC;
• Woodbridge Mortgage Investment Fund 3A, LLC;
• Woodbridge Mortgage Investment Fund 4, LLC;
• Woodbridge Commercial Bridge Loan Fund 1, LLC;
• Woodbridge Commercial Bridge Loan Fund 2, LLC.

As members and associated persons of FINRA, brokerage firms and their financial advisors must ensure that investors are informed of the risks associated with an investment, and must conduct a suitability analysis to determine if an investment meets an investor’s stated investment objectives and risk profile. Either an unsuitable recommendation to purchase an investment or a misrepresentation concerning the nature and characteristics of the investment may give rise to a claim against a stockbroker or financial advisor.

If you have invested in any of the Woodbridge Funds, or otherwise purchased a First Position Commercial Mortgage or Woodbridge Fund Offering or Unit, you may be able to recover investment losses in FINRA arbitration, or in some instances, litigation. Investors may contact a securities arbitration attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

As highlighted in our most recent blog posts concerning the Woodbridge Group of Companies (“Woodbridge”) of Sherman Oaks, CA, Woodbridge filed for Chapter 11 bankruptcy on December 4, 2017, in Delaware Bankruptcy Court (Case No. 17-12560-KJC). Thereafter, on December 21^st, the SEC formally filed charges against Woodbridge and its owner and former CEO, Robert Shapiro, alleging that “[D]efendant… used his web of more than 275 Limited Liability Companies to conduct a massive Ponzi scheme raising more than $1.22 billion from over 8,400 unsuspecting investors nationwide through fraudulent unregistered securities offerings.”

By January 2, 2018, the SEC further alleged, among other things, that the timing of the Chapter 11 proceeding called into question whether Mr. Shapiro had preemptively sought bankruptcy protection, in the first instance, in order to shield himself from impending charges of misconduct. Through its Motion to Direct the Appointment of a Chapter 11 Trustee, the SEC alleged that cause existed for the appointment of an independent trustee to help manage the bankruptcy process and protect the interests of numerous Woodbridge investors: “[i]nstead of allowing a District Court to appoint an independent fiduciary, Robert Shapiro decided that he would select the victims’ fiduciaries when he started hiring the team of managers and professionals who are representing the Debtors’ estates today.”

On January 19, 2018, turnaround specialist Mr. Lawrence Perkins of SierraConstellation Partners LLC, resigned as Chief Restructuring Officer of Woodbridge. As recently reported, Mr. Perkins’ resignation will be effective once a replacement is hired, according to attorney Sam Beach of Young, Conaway, Stargatt & Taylor, counsel for Woodbridge. Further, the Bankruptcy Court scheduled closing arguments related to the request for an independent trustee for Tuesday, January 23, 2018.

Investors who purchased Woodbridge First Position Commercial Mortgages (“FPCMs”) or a five-year private placement security (“Fund Offerings” or “Units”) through a stockbroker or financial advisor may have viable litigation or FINRA arbitration claims if the brokerage firm or Registered Investment Advisor (“RIA”) did not perform adequate due diligence before recommending the Woodbridge investment.

Some of the issuers of Woodbridge securities include the following entities:

• WMF Management, LLC (“WMF”);
• Woodbridge Group of Companies, LLC (d/b/a Woodbridge Wealth);
• Woodbridge Mortgage Investment Fund 1, LLC;
• Woodbridge Mortgage Investment Fund 2, LLC;
• Woodbridge Mortgage Investment Fund 3, LLC;
• Woodbridge Mortgage Investment Fund 3A, LLC;
• Woodbridge Mortgage Investment Fund 4, LLC;
• Woodbridge Commercial Bridge Loan Fund 1, LLC;
• Woodbridge Commercial Bridge Loan Fund 2, LLC.

As members and associated persons of FINRA, brokerage firms and their financial advisors must ensure that investors are informed of the risks associated with an investment, and must conduct a suitability analysis to determine if an investment meets an investor’s stated investment objectives and risk profile. Either an unsuitable recommendation to purchase an investment or a misrepresentation concerning the nature and characteristics of the investment may give rise to a claim against a stockbroker or financial advisor.

If you have invested in any of the Woodbridge Funds, or otherwise purchased a First Position Commercial Mortgage or Woodbridge Fund Offering or Unit, you may be able to recover investment losses in FINRA arbitration, or in some instances, litigation. Investors may contact a securities arbitration attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

As we have discussed in previous blog posts, on December 21, 2017, the Securities and Exchange Commission (“SEC”) formally announced charges against the Woodbridge Group of Companies (“Woodbridge”) of Sherman Oaks, CA, as well as Woodbridge’s related unregistered investment funds and the firm’s owner and former CEO, Robert Shapiro. Essentially, the SEC has alleged that “[D]efendant Robert H. Shapiro used his web of more than 275 Limited Liability Companies to conduct a massive Ponzi scheme raising more than $1.22 billion from over 8,400 unsuspecting investors nationwide through fraudulent unregistered securities offerings.”

The SEC’s recent charges come on the heels of Woodbridge filing for Chapter 11 bankruptcy protection on December 4, 2017 in Delaware Bankruptcy Court (Case No. 17-12560-KJC). Through filings with the Bankruptcy Court, the SEC has alleged that Mr. Shapiro sought Chapter 11 protection in order to shield himself from charges of allegedly orchestrating a Ponzi scheme: “[h]e needed to create the appearance of a bankruptcy that resembled a bona fide Chapter 11, complete with legal and restructuring professionals of the type normally seen in a real organization. So instead of allowing a District Court to appoint an independent fiduciary, Robert Shapiro decided that he would select the victims’ fiduciaries when he started hiring the team of managers and professionals who are representing the Debtors’ estates today.”

On January 2, 2018 — in light of these allegations and concerns related to ensuring adequate representation of the numerous Woodbridge investors nationwide — the SEC filed a Motion to Direct the Appointment of a Chapter 11 Trustee. Pursuant to 11 U.S.C. §1104(a), the SEC has sought to appoint an independent Chapter 11 trustee for cause, in order to ensure Woodbridge investors are best protected. In seeking the appointment of a Chapter 11 trustee, the SEC has argued that cause exists, given allegations that “[M]r. Shapiro engaged in widespread fraud, dishonesty, incompetence and gross mismanagement in operating the Debtors prior to bankruptcy. This conduct is sufficient cause for a trustee under Section 1104(a)(1). In re Vaughan, 429 B.R. 14 (Bankr. D. N.M. 2010) (conduct relating to operation of Ponzi scheme falls squarely within Section 1104(a)).”

Investors who purchased Woodbridge First Position Commercial Mortgages (“FPCMs”) or a five-year private placement security (“Fund Offerings” or “Units”) through a stockbroker or financial advisor may have viable litigation or FINRA arbitration claims if the brokerage firm or Registered Investment Advisor (“RIA”) did not perform adequate due diligence before recommending the Woodbridge investment.

Some of the issuers of Woodbridge securities include the following entities:

• WMF Management, LLC (“WMF”);
• Woodbridge Group of Companies, LLC (d/b/a Woodbridge Wealth);
• Woodbridge Mortgage Investment Fund 1, LLC;
• Woodbridge Mortgage Investment Fund 2, LLC;
• Woodbridge Mortgage Investment Fund 3, LLC;
• Woodbridge Mortgage Investment Fund 3A, LLC;
• Woodbridge Mortgage Investment Fund 4, LLC;
• Woodbridge Commercial Bridge Loan Fund 1, LLC;
• Woodbridge Commercial Bridge Loan Fund 2, LLC.

As members and associated persons of FINRA, brokerage firms and their financial advisors must ensure that investors are informed of the risks associated with an investment, and must conduct a suitability analysis to determine if an investment meets an investor’s stated investment objectives and risk profile. Either an unsuitable recommendation to purchase an investment or a misrepresentation concerning the nature and characteristics of the investment may give rise to a claim against a stockbroker or financial advisor.

If you have invested in any of the Woodbridge Funds, or otherwise purchased a First Position Commercial Mortgage or Woodbridge Fund Offering or Unit, you may be able to recover investment losses in FINRA arbitration, or in some instances, litigation. Investors may contact a securities arbitration attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

As we recently discussed in detail in a previous blog post, on December 21, 2017, the Securities and Exchange Commission (“SEC”) formally announced charges, as well as an asset freeze, against the Woodbridge Group of Companies (“Woodbridge”) of Sherman Oaks, CA, as well as Woodbridge’s related unregistered investment funds, and the firm’s owner and former CEO, Robert Shapiro. Among other things, the SEC has alleged in its Complaint – filed in Florida federal court – that “[D]efendant Robert H. Shapiro used his web of more than 275 Limited Liability Companies to conduct a massive Ponzi scheme raising more than $1.22 billion from over 8,400 unsuspecting investors nationwide through fraudulent unregistered securities offerings.”

According to the SEC’s Complaint, Woodbridge utilized a large and coordinated sales force to sell its Woodbridge Notes, sometimes referred to as First Position Commercial Mortgages (“FPCMs”). As further alleged by the SEC, “Woodbridge employed a sales team of approximately 30 in-house employees that operated within Woodbridge’s offices.” Moreover, the SEC’s Complaint alleges that “Woodbridge also utilized a network of hundreds of external sales agents to solicit investments from the general public by way of television, radio, and newspaper advertisements, cold calling campaigns, social media, websites, seminars and in-person presentations.”

As detailed in the SEC’s Complaint, the Woodbridge business model relied upon borrowing money from investors in exchange for promissory notes, typically maturing in 12 – 18 months. These notes carried an annual interest rate of 5 – 8%, payable monthly. The investors’ money was supposed to be issued to lenders in the form of securitized mortgages. However, according to the SEC, this rarely occurred.

As recently reported and covered in several of our prior blog posts, Woodbridge declared Chapter 11 bankruptcy in Delaware in early December. The timing of the filing came on the heels of Woodbridge discontinuing its interest payments to investors. In its bankruptcy filings, Woodbridge cited “increased operating and development costs” that “were exacerbated by the unforeseen costs associated with ongoing litigation and regulatory compliance.”

At this stage, it appears that while Woodbridge was marketed nationwide to a number of investors, South Florida was a particular hotbed of activity. This makes sense, given the large number of retirees and pensioners residing in Florida who seek stable fixed income investments. In fact, as recently reported, one insurance salesman and former broker supposedly sent invitations to potential Woodbridge investors, encouraging potential attendees to “learn how to earn 6% fixed interest” a year, while also highlighting “monthly income checks” and “no market risk.”

It appears that many investors in Woodbridge succumbed to the promise of earning above-market yields on safe, conservative, “risk-free” or “secured” investments in mortgages. Of course, such representations often prove to be a red flag, or indicator of some wrongdoing. When an advisor or promoter makes the claim that an investment product has no risk or is somehow crash proof, it should serve as an immediate warning or red flag to an investor of potential fraud.

Investors who purchased Woodbridge First Position Commercial Mortgages (“FPCMs”) through a stockbroker or financial advisor may have viable FINRA arbitration claims if the brokerage firm or Registered Investment Advisor (“RIA”) did not perform adequate due diligence before recommending the Woodbridge investment.

Some of the issuers of Woodbridge securities include the following entities:

• WMF Management, LLC (“WMF”);
• Woodbridge Group of Companies, LLC (d/b/a Woodbridge Wealth);
• Woodbridge Mortgage Investment Fund 1, LLC;
• Woodbridge Mortgage Investment Fund 2, LLC;
• Woodbridge Mortgage Investment Fund 3, LLC;
• Woodbridge Mortgage Investment Fund 3A, LLC;
• Woodbridge Mortgage Investment Fund 4, LLC;
• Woodbridge Commercial Bridge Loan Fund 1, LLC;
• Woodbridge Commercial Bridge Loan Fund 2, LLC.

As members and associated persons of FINRA, brokerage firms and their financial advisors must ensure that adequate due diligence is performed on any investment that is recommended to investors – including private placements under Regulation D. Further, firms and their brokers must ensure that investors are informed of the risks associated with an investment, and must conduct a suitability analysis to determine if an investment meets an investor’s stated investment objectives and risk profile. Either an unsuitable recommendation to purchase an investment or a misrepresentation concerning the nature and characteristics of the investment may give rise to a claim against a stockbroker or financial advisor.

If you have invested in any of the Woodbridge Funds, or otherwise purchased a First Position Commercial Mortgage through investing in a Woodbridge promissory note, from a registered representative of a broker-dealer, you may be able to recover investment losses in FINRA arbitration. Investors may contact a securities arbitration attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

On December 21, 2017, the Securities and Exchange Commission (“SEC”) formally announced charges, as well as an asset freeze, against the Woodbridge Group of Companies (“Woodbridge”) and its related unregistered investment funds, as well against Woodbridge’s owner and former CEO, Robert Shapiro. Through initiating litigation (the “Complaint”) in Florida federal court, the SEC is alleging, in sum and substance, that “[D]efendant Robert H. Shapiro used his web of more than 275 Limited Liability Companies to conduct a massive Ponzi scheme raising more than $1.22 billion from over 8,400 unsuspecting investors nationwide through fraudulent unregistered securities offerings.” As further alleged in the Complaint, “Despite receiving over one billion dollars in investor funds, Shapiro and his companies only generated approximately $13.7 million in interest income from truly unaffiliated third-party borrowers. Without real revenue to pay the monies due to investors, Shapiro resorted to fraud, using new investor money to pay the returns owed to exiting investors.”

According to Mr. Steven Peikin, Co-Director of the SEC’s Enforcement Division, “Our complaint alleges that Woodbridge’s business model was a sham. The only way Woodbridge was able to pay investors their dividends and interest payments was through the constant infusion of new investor money.”

If you are have invested in Woodbridge Wealth or in any of the Woodbridge Mortgage Funds, you may have questions concerning your rights in light of Woodbridge’s recent bankruptcy filing and the SEC’s recent Complaint alleging that Woodbridge is, in fact, a Ponzi Scheme.

Investors who purchased Woodbridge First Position Commercial Mortgages (“FPCMs”) through a stockbroker or financial advisor may have viable FINRA arbitration claims if the brokerage firm or Registered Investment Advisor (“RIA”) did not perform adequate due diligence before recommending the Woodbridge investment.

Some of the issuers of Woodbridge securities include the following entities:

• WMF Management, LLC (“WMF”);
• Woodbridge Group of Companies, LLC (d/b/a Woodbridge Wealth);
• Woodbridge Mortgage Investment Fund 1, LLC;
• Woodbridge Mortgage Investment Fund 2, LLC;
• Woodbridge Mortgage Investment Fund 3, LLC;
• Woodbridge Mortgage Investment Fund 3A, LLC;
• Woodbridge Mortgage Investment Fund 4, LLC;
• Woodbridge Commercial Bridge Loan Fund 1, LLC;
• Woodbridge Commercial Bridge Loan Fund 2, LLC.

As members and associated persons of FINRA, brokerage firms and their financial advisors must ensure that adequate due diligence is performed on any investment that is recommended to investors – including private placements under Regulation D. Further, firms and their brokers must ensure that investors are informed of the risks associated with an investment, and must conduct a suitability analysis to determine if an investment meets an investor’s stated investment objectives and risk profile. Either an unsuitable recommendation to purchase an investment or a misrepresentation concerning the nature and characteristics of the investment may give rise to a claim against a stockbroker or financial advisor.

If you have invested in any of the Woodbridge Funds, or otherwise purchased a First Position Commercial Mortgage through investing in a Woodbridge promissory note, you may be able to recover investment losses in FINRA arbitration. To find out more about your legal rights and options, contact a securities arbitration attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

As recently discussed in our blog, on Monday, December 4, the Woodbridge Group of Companies, LLC (“Woodbridge”) of Sherman Oaks, CA, filed for Chapter 11 bankruptcy protection in Delaware Bankruptcy Court (Case No. 17-12560-KJC). Woodbridge has asserted that a restructuring of its debt was necessary due to increased operating and development costs, in addition to expenses associated with ongoing litigation and regulatory compliance. As we have discussed in several previous blog posts, Woodbridge continues to face considerable regulatory scrutiny in connection with allegations of offering and selling unregistered securities, in addition to allegations of possible misconduct by Woodbridge and its President, Robert Shapiro.

As reported on December 6, Woodbridge’s First Day Motions in Delaware Bankruptcy Court (“Motions”) were successful. The Bankruptcy Court issued certain interim authorizations to help ensure Woodbridge’s ability to continue operations in the ordinary course during its restructuring process. For instance, the Bankruptcy Court approved Woodbridge’s request to access debtor-in-possession (“DIP”) financing through a California private direct lender specializing in real estate debt investments, Hankey Capital, LLC (“Hankey”).

This DIP financing, combined with cash on hand generated by Woodbridge’s operations, is intended to support continued business operations during the restructuring process. In signing off of on Woodbridge’s request to borrow $6 million for a day through its DIP financing, Judge Kevin Casey indicated “The request here is a relatively modest one.” In addition to receiving approval on its initial DIP financing request, Woodbridge also received approval for, among other things, cash to pay employee salaries and benefits.

Woodbridge’s DIP facility with Hankey is structured to provide Woodbridge with up to $100 million in post-petition financing. In exchange for offering Woodbridge the DIP financing, Hankey has secured first priority priming liens on a set of twenty-eight (28) of Woodbridge’s properties, referenced in the bankruptcy filings as “Core Assets.”

As we have previously reported, investors in Woodbridge’s so-called First Position Commercial Mortgages, or FPCMs (“Noteholders”) should have cause for concern, even at this early stage, in light of their questionable status as secured creditors during the restructuring process. For example, as set forth by Woodbridge in its bankruptcy petition, the company believes “[t]hat the Noteholders’ liens on the Third-Party Collateral are not properly perfected and are thus subject to avoidance….” Moreover, given the fact that Hankey now has first priority liens on certain Core Assets, there is a distinct possibility that investors will find themselves taking significant haircuts and incurring steep losses on the capital invested in Woodbridge FPCMs.

To date, Woodbridge has been the subject of numerous investigations by state securities regulators. Several of these investigations have resulted in the issuance of cease-and-desist orders, requiring Woodbridge to stop offering and/or selling unregistered securities, and further, to stop otherwise violating applicable securities laws. These regulatory allegations are factual assertions by the regulators and have not been independently verfied by our attorneys.

Woodbridge, through various Woodbridge Mortgage Investment Funds has marketed FPCMs to investors nationwide through issuing promissory notes in exchange for investments backing certain hard money loans secured by commercial real estate. Some of the issuers of Woodbridge securities include the following entities:

• WMF Management, LLC;
• Woodbridge Group of Companies, LLC;
• Woodbridge Mortgage Investment Fund 1, LLC;
• Woodbridge Mortgage Investment Fund 2, LLC;
• Woodbridge Mortgage Investment Fund 3, LLC;
• Woodbridge Mortgage Investment Fund 3A, LLC;
• Woodbridge Mortgage Investment Fund 4, LLC;
• Woodbridge Mortgage Investment Fund PA, LLC;
• Woodbridge Group of Companies, LLC (d/b/a Woodbridge Wealth).

Financial advisors, and by extension their brokerage firm, have a duty to perform adequate due diligence on any investment recommended to customers, including private placement offerings pursuant to Regulation D. In addition, financial advisors have a duty to disclose the risks associated with any investment, and moreover, to conduct a suitability analysis to determine if an investment meets an investor’s stated investment objectives and associated risk profile.

If you have invested in any of the Woodbridge Funds, or otherwise purchased a First Position Commercial Mortgage through investing in a Woodbridge promissory note, you may be able to recover investment losses in FINRA arbitration. Investors may contact Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

If you are have invested in Woodbridge Wealth or in any of the Woodbridge Mortgage Funds, you may have questions concerning your rights in light of Woodbridge’s recent bankruptcy filing.

Investors who purchased Woodbridge FPCMs through a stockbroker or financial advisor may have viable FINRA arbitration claims if the brokerage firm did not perform adequate due diligence before recommending the Woodbridge investment. Law Office of Christopher J. Gray, P.C. offers a confidential, no-obligation consultation to Woodbridge investors.

Woodbridge Wealth, a California-based firm, sells structured financial products to investors, often through intermediary brokers. Woodbridge has reportedly raised over $1 billion by selling investors instruments known as First Position Commercial Mortgages (“FPCMs”). The Woodbridge Funds advertise that their management team’s substantial experience lets them maintain a successful lending model and find lending opportunities that are favorable for investors. Investors do not have any role other than providing money. An FPCM consists of a promissory note from a Woodbridge Fund, a loan agreement, and a non-exclusive assignment of the Woodbridge Fund’s security interest in the mortgage for the underlying hard-money loan. The Woodbridge Funds pool money from multiple investors for each hard-money loan. The Woodbridge Funds’ promissory notes effectively guarantee the underlying hard-money loans, and the Woodbridge Funds’ advertising materials state that the Woodbridge Funds are obligated to make payments to FPCM investors even if the hard-money borrower defaults.

However, the viability of Woodbridge’s FPCMs is called into question by Woodbridge’s filing for Chapter 11 bankruptcy protection in Delaware Bankruptcy Court (Case No. 17-12560-KJC). Woodbridge has asserted that a restructuring of its debt was necessary due to increased operating and development costs, in addition to expenses associated with ongoing litigation and regulatory compliance. In a development that may be of concern to FPCM investors, Woodbridge argued in its bankruptcy court filings as follows: “While the Debtors believe that the Noteholders’ liens on Third-Party Collateral are not properly perfected and are thus subject to avoidance, out of an abundance of caution, at this stage in the proceedings the Debtors are making available conditional adequate protection to the Noteholders…” Translated into English, this appears to mean that Woodbridge believes its FPCM holders are unsecured creditors who will not get paid a penny in bankruptcy until after secured creditors have been paid in full.

Woodbridge’s FPCM sales have resulted in certain actions and/or investigations by regulators, including state regulators in Pennsylvania, Michigan, Massachusetts, and Colorado, as well as the U.S. Securities and Exchange Commission (‘SEC”). For example, in May of 2015, Massachusetts state regulators charged an individual with fraud based on the regulators’ allegations that he was marketing and selling unregistered securities to vulnerable elderly investors. The SEC is also reportedly investigating the Woodbridge Group of Companies for possible violations ongoing violations of Sections 5(a), 5(c), and 17(a) of the Securities Act, and Section 15(a) and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, by Woodbridge and other persons and entities. Specifically, the Commission is reportedly investigating the offer and sale of unregistered securities, the sale of securities by unregistered brokers, and the commission of fraud in connection with the offer, purchase, and sale of securities. Please note that these regulatory allegations remain unproven and represent only the factual allegations made by the government regulators.

Some of the Woodbridge entities or Woodbridge Funds include the following:

• WMF Management, LLC
• Woodbridge Group of Companies, LLC
• Woodbridge Mortgage Investment Fund 1, LLC
• Woodbridge Mortgage Investment Fund 2, LLC
• Woodbridge Mortgage Investment Fund 3, LLC
• Woodbridge Mortgage Investment Fund PA, LLC
• Woodbridge Group of Companies, LLC (DBA Woodbridge Wealth)

Investors who purchased Woodbridge FPCMs through a stockbroker or financial advisor may have viable FINRA arbitration claims if the brokerage firm did not perform adequate due diligence before recommending the Woodbridge investment. As members and associated persons of FINRA, brokerage firms and their financial advisors must ensure that adequate due diligence is performed on any investment that is recommended to investors- including private placements under Regulation D. Further, firms and their brokers must ensure that investors are informed of the risks associated with an investment, and must conduct a suitability analysis to determine if an investment meets an investor’s stated investment objectives and risk profile. Either an unsuitable recommendation to purchase an investment or a misrepresentation concerning the nature and characteristics of the investment may give rise to a claim against a stockbroker or financial advisor.

Woodbridge investors with questions about their rights may contact Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a confidential, no-obligation consultation.

On December 4, 2017, the Woodbridge Group of Companies, LLC (“Woodbridge”) of Sherman Oaks, CA, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware. As we have previously highlighted in a series of blog posts, Woodbridge has come under considerable regulatory scrutiny over the past year, both by the Securities and Exchange Commission (“SEC”), and various state securities regulators including officials in Arizona, Colorado, Idaho, Massachusetts, Michigan, Pennsylvania, and Texas.

In a letter to investors dated December 5, Woodbridge announced the bankruptcy filing and stated that “[t]he Company took this action in an effort to recapitalize its debt and establish a stronger financial platform.”

In the investor letter, Woodbridge elaborated as follows concerning the purported reasons for the bankruptcy: “While Woodbridge continues to be a leading developer of high-end real estate, as the business has grown, increased operating and development costs have been exacerbated by the unforeseen costs associated with ongoing litigation and regulatory compliance. This combination of rising costs and regulatory pressure led to a loss of liquidity, resulting in an inability to make our regularly scheduled one-year Notes payment due December 1, 2017. So you understand, this unpaid obligation incurred by Woodbridge prior to December 4, 2017 is now frozen and will be considered as general unsecured claims in the restructuring proceedings.”

Not fully explained in the investor letter was the revelation in the bankruptcy petition as follows: “While the Debtors believe that the Noteholders’ liens on Third-Party Collateral are not properly perfected and are thus subject to avoidance, out of an abundance of caution, at this stage in the proceedings the Debtors are making available conditional adequate protection to the Noteholders…” Translated into English, this appears to mean that Woodbridge believes its Noteholders are unsecured creditors who will not get paid a penny in bankruptcy until after secured creditors have been paid in full.

Included among the various Woodbridge entities or mortgage funds (and, apparently, the issuers of Woodbridge notes) are the following:

• WMF Management, LLC;
• Woodbridge Group of Companies, LLC;
• Woodbridge Mortgage Investment Fund 1, LLC;
• Woodbridge Mortgage Investment Fund 2, LLC;
• Woodbridge Mortgage Investment Fund 3, LLC;
• Woodbridge Mortgage Investment Fund 3A, LLC;
• Woodbridge Mortgage Investment Fund 4, LLC;
• Woodbridge Mortgage Investment Fund PA, LLC;
• Woodbridge Group of Companies, LLC (d/b/a Woodbridge Wealth).

Financial advisors, and by extension their brokerage firm, have a duty to perform adequate due diligence on any investment recommended to customers, including private placement offerings pursuant to Regulation D. In addition, financial advisors have a duty to disclose the risks associated with any investment, and moreover, to conduct a suitability analysis to determine if an investment meets an investor’s stated investment objectives and associated risk profile.

If you have invested in any of the Woodbridge Funds, or otherwise purchased a First Position Commercial Mortgage through investing in a Woodbridge promissory note private placement, you may be able to recover investment losses in FINRA arbitration or through litigation. Investors may contact a securities arbitration attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

On December 4, 2017, the Woodbridge Group of Companies, LLC (“Woodbridge”) of Sherman Oaks, CA, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware. As we have previously highlighted in a series of blog posts, Woodbridge has come under considerable regulatory scrutiny over the past year, both by the Securities and Exchange Commission (“SEC”), and various state securities regulators including officials in Arizona, Colorado, Idaho, Massachusetts, Michigan, Pennsylvania, and Texas. Further, according to bankruptcy filings, Woodbridge has received information requests from state securities regulators in approximately 25 states. The investigations conducted by securities regulators at both the federal and state level have centered on allegations of offering and selling unregistered securities that are not exempt from registration.

In addition, at the federal level, the SEC has raised allegations of possible misconduct by Woodbridge and its President, Robert Shapiro (“Shapiro”). On Friday, December 1, Mr. Shapiro resigned as Woodbridge’s CEO. As of Monday, December 4, according to bankruptcy proceeding filings, Woodbridge owes approximately $750 million to an estimated 8,998 noteholders who invested in various Woodbridge funds. Holders of these notes are entitled to a fixed rate of interest generally ranging from 4.5 – 13%, payable on a monthly basis, and repayment of principal upon maturity (typically within 12-20 months of issuance) of the note.

Woodbridge operates through a complex structure of interrelated companies (numbering about 250) which are owned either directly or indirectly by RS Protection Trust, an irrevocable Nevada trust, of which Mr. Shapiro is the trustee and his family members are the sole beneficiaries. Included among the various Woodbridge entities or mortgage funds are the following:

• WMF Management, LLC;
• Woodbridge Group of Companies, LLC;
• Woodbridge Mortgage Investment Fund 1, LLC;
• Woodbridge Mortgage Investment Fund 2, LLC;
• Woodbridge Mortgage Investment Fund 3, LLC;
• Woodbridge Mortgage Investment Fund 3A, LLC;
• Woodbridge Mortgage Investment Fund 4, LLC;
• Woodbridge Mortgage Investment Fund PA, LLC;
• Woodbridge Group of Companies, LLC (d/b/a Woodbridge Wealth).

As indicated in certain bankruptcy proceeding filings, “Due to the concerns expressed by federal and state securities regulators regarding the Woodbridge Group Enterprises’ fundraising activities, Mr. Shapiro has agreed to empower an independent management team to take control of [Woodbridge] during the pendency of the Chapter 11 Cases…” Thus, as part of the contemplated Chapter 11 restructuring process, Mr. Shapiro will cede control of his business enterprise to Beilinson Advisory Group, an independent financial restructuring and hospitality advisory group owned and controlled by Mr. Mark Beilinson.

At this stage, Woodbridge has indicated that its assets include a portfolio of some 138 properties ranging in value from about $50,000 – $150,000,000. These properties, in various stages of development or renovation, include some raw land parcels.

For investors in Woodbridge notes, sometimes referred to as First Position Commercial Mortgages (“FPCMs”), there is significant cause for concern. Specifically, Woodbridge has indicated in its bankruptcy petition that: “While the Debtors believe that the Noteholders’ liens on Third-Party Collateral are not properly perfected and are thus subject to avoidance, out of an abundance of caution, at this stage in the proceedings the Debtors are making available conditional adequate protection to the Noteholders… .”

While it is still too early to determine how investors in Woodbridge notes or FPCMs (“Noteholders”) will fare in the bankruptcy proceeding, it is already troubling that Woodbridge has indicated that Noteholders may not have perfected liens on the real estate assets underlying their investment(s). Thus, it is conceivable that Noteholders will suffer steep losses on their principal invested.

Financial advisors, and by extension their brokerage firm, have a duty to perform adequate due diligence on any investment recommended to customers, including private placement offerings pursuant to Regulation D. In addition, financial advisors have a duty to disclose the risks associated with any investment, and moreover, to conduct a suitability analysis to determine if an investment meets an investor’s stated investment objectives and associated risk profile.

If you have invested in any of the Woodbridge Funds, or otherwise purchased a First Position Commercial Mortgage through investing in a Woodbridge promissory note, you may be able to recover investment losses in FINRA arbitration or through litigation. Investors may contact a securities arbitration attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

On March 18, 2016, the Securities Commissioner of the State of Texas (“Securities Commissioner”) entered a Cease and Desist Order (“Order”) against Woodbridge Mortgage Investment Fund 3, LLC (“Woodbridge 3” or “Respondent”). Respondent Woodbridge 3 is a Delaware-organized limited liability company formed in or around 2014. Woodbridge 3 is one of a number of mortgage funds offered by the Woodbridge Group of Companies, LLC (“Woodbridge”), the successor firm to Woodbridge Structured Funding, LLC. Woodbridge is headquartered in Sherman Oaks, CA, and its principal and controlling person is Robert H. Shapiro (“Shapiro”).

In connection with the Securities Commissioner’s Order, State of Texas securities regulators made the following findings of fact concerning their investigation into Woodbridge 3:

• The Bureau determined that Respondents Woodbridge 3 and Shapiro offered and sold “First Position Commercial Mortgages” (“FPCMs” or “The Note Program”) to investors in Texas that fell within the definition of a security;
• On July 17, 2015, the Securities Commissioner entered an Emergency Cease and Desist Order (No. ENF-15-CDO-1740) (“Emergency Order”) against Respondents, as well as other parties;
• On or about August 20, 2015, Respondents Woodbridge and Shapiro filed a request to modify or set aside the Emergency Order;
• By virtue of entering into the March 18, 2016 Order, Respondents withdrew their request for an administrative hearing “… as the parties [had] settled all matters in controversy.”

Pursuant to the Securities Commissioner’s findings, it was concluded that the Note Program constituted investments in securities, as defined by Section 4.1 of the Texas Securities Act (the “Act”). Furthermore, the Securities Commissioner concluded that Respondents Woodbridge and Shapiro had allegedly violated Section 7 of the Act by “… offering securities for sale in Texas at a time when the securities were not registered with the Securities Commissioner.” Based upon these alleged violations, the Securities Commissioner ordered that Respondents immediately cease and desist from offering for sale unregistered securities through its Note Program to Texas residents under the Act, until such time as the Note Program became registered in Texas and sold “… pursuant to an exemption from registration under the Texas Securities Act.”

In addition to regulatory scrutiny in Texas, Woodbridge has been subject to investigations by state securities regulators in: Arizona, Colorado, Massachusetts, Michigan, and Pennsylvania. Included among the various Woodbridge entities or mortgage funds are the following:

• WMF Management, LLC;
• Woodbridge Group of Companies, LLC;
• Woodbridge Mortgage Investment Fund 1, LLC;
• Woodbridge Mortgage Investment Fund 2, LLC;
• Woodbridge Mortgage Investment Fund 3, LLC;
• Woodbridge Mortgage Investment Fund 3A, LLC;
• Woodbridge Mortgage Investment Fund 4, LLC;
• Woodbridge Mortgage Investment Fund PA, LLC;
• Woodbridge Group of Companies, LLC (d/b/a Woodbridge Wealth).

Among the many risks associated with investing in securities through a private placement is the potential for fraud or related misconduct. Pursuant to applicable federal securities laws, as well as corresponding state “Blue Sky” laws governing securities — in order for unregistered securities to be sold in a compliant manner — in nearly all instances an exemption to registration must apply. With respect to securities offerings under the Note Program through Woodbridge 3 to Texas investors, it does not appear that offerings to Texas investors were recommended to investors as exempt securities through a permissible private placement offering.

If you have purchased any of the Woodbridge Notes and have suffered losses, you may be able to recover these losses in FINRA arbitration if the investment was based on a recommendation from a stockbroker or financial advisor that lacked a reasonable basis. Investors may contact a securities arbitration attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

As recently reported, the Woodbridge Group of Companies, LLC (“Woodbridge”) of Sherman Oaks, CA, continue to face considerable regulatory scrutiny in connection with allegations of offering and selling unregistered securities. For the past year on the federal level, the Securities and Exchange Commission (“SEC”) has been conducting an investigation into Woodbridge. In that regard, according to a publicly available court filing, the SEC “[i]s investigating the offer and sale of unregistered securities, the sale of securities by unregistered brokers and the commission of fraud in connection with the offer, purchase and sale of securities” by Woodbridge and its affiliated companies and agents.

Concurrently at the state level, Woodbridge has been the subject of investigations by various state securities regulators in Arizona, Texas, Massachusetts, Pennsylvania, and Michigan (as well as recent inquiries made by the Colorado Division of Securities). Several of these investigations have resulted in regulators issuing cease-and-desist orders, requiring Woodbridge to stop offering and/or selling unregistered securities, and furthermore, to stop otherwise violating applicable securities laws.

For example, on or about April 24, 2017, the Commonwealth of Pennsylvania Department of Banking and Securities, Bureau of Securities Compliance (the “Bureau”) entered into a Consent Agreement and Order (“Consent Order”) with Woodbridge. As part of the Consent Order, Respondent Woodbridge — without admitting or denying any of the allegations raised by the Bureau — agreed to pay an administrative assessment of $30,000, and additionally agreed to adhere to Pennsylvania’s state securities laws which prohibit, among other things, selling unregistered securities that are not exempt from registration.

The Bureau has also focused its attention on various individuals who allegedly sold certain Woodbridge mortgage funds (“Woodbridge Funds”), often marketed as First Position Commercial Mortgages (“FPCMs”), to Pennsylvania investors. For example, from August – October 2017, publicly available information demonstrates that the Bureau has issued Orders to Show Cause against the following four (4) individual Respondents in connection with their purportedly selling certain Woodbridge Funds to Pennsylvania residents:

• August 8, 2017 – an Order to Show Cause was issued by the Bureau against Dennis Drake (“Drake”). The Bureau has alleged that Mr. Drake offered and sold interests in a certain Woodbridge Fund(s) for an aggregate amount of at least $75,000 to at least one Pennsylvania investor;
• August 8, 2017 – an Order to Show Cause was issued by the Bureau against Elizabeth J. Haskell d/b/a Iron Will Advisory Group (“Haskell”). The Bureau has alleged that Ms. Haskell offered and sold interests in a certain Woodbridge Fund(s) for an aggregate amount of at least $350,000 to at least one Pennsylvania investor;
• October 13, 2017 – an Order to Show Cause was issued by the Bureau against Greg A. Koch d/b/a Koch Financial Group (“Koch”). The Bureau has alleged that Mr. Koch offered and sold interests in a certain Woodbridge Fund(s) for an aggregate amount of at least $710,000 to at least three Pennsylvania investors;
• October 18, 2017 – an Order to Show Cause was issued by the Bureau against Michael Kandravi d/b/a Explore Financial Group (“Kandravi”). The Bureau has alleged that Mr. Kandravi offered and sold interests in a certain Woodbridge Fund(s) for an aggregate amount of at least $475,000 to Pennsylvania investors.

The Bureau has alleged that the above-named individual Respondents engaged in activity in Pennsylvania that resulted in a “[w]illful violation of Section 301(a)” of the Pennsylvania Securities Act of 1972 (the “Act”), based upon their purportedly selling unregistered securities that were not exempt from registration.

At this time, Woodbridge reportedly continues to sell securities. Some of the issuers of Woodbridge securities (and not necessarily the same Woodbridge Funds subject to the various aforementioned Pennsylvania regulatory proceedings) include the following entities:

• WMF Management, LLC;
• Woodbridge Group of Companies, LLC;
• Woodbridge Mortgage Investment Fund 1, LLC;
• Woodbridge Mortgage Investment Fund 2, LLC;
• Woodbridge Mortgage Investment Fund 3, LLC;
• Woodbridge Mortgage Investment Fund 3A, LLC
• Woodbridge Mortgage Investment Fund 4, LLC;
• Woodbridge Mortgage Investment Fund PA, LLC;
• Woodbridge Group of Companies, LLC (d/b/a Woodbridge Wealth).

Financial advisors, and by extension their brokerage firm, have a duty to perform adequate due diligence on any investment recommended to customers, including private placement offerings pursuant to Regulation D. In addition, financial advisors have a duty to disclose the risks associated with any investment, and moreover, to conduct a suitability analysis to determine if an investment meets an investor’s stated investment objectives and associated risk profile.

If you have invested in any of the Woodbridge Funds, or otherwise purchased a First Position Commercial Mortgage through investing in a Woodbridge promissory note based on the advice of a stockbroker or financial advisor, you may be able to recover investment losses in FINRA arbitration. Investors may contact a securities arbitration attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

As recently reported, the Woodbridge Group of Companies, LLC (“Woodbridge”) of Sherman Oaks, CA, continues to face considerable regulatory scrutiny in connection with allegations of offering and selling unregistered securities. To date, Woodbridge has been the subject of investigations by state securities regulators in Arizona, Texas, Massachusetts, Pennsylvania, and Michigan. Several of these investigations have resulted in regulators issuing cease-and-desist orders, requiring Woodbridge to stop offering and/or selling unregistered securities, and further, to stop otherwise violating applicable securities laws.

As of mid-November 2017, Woodbridge has settled regulatory actions in Pennsylvania, Texas and Massachusetts. The company, which has offered a number of various Woodbridge Mortgage Investment Funds (“Woodbridge Funds”), has marketed so-called “First Position Commercial Mortgages” (or “FPCMs”) to investors nationwide through issuing promissory notes in exchange for investments backing certain hard money loans secured by commercial real estate.

At the federal level, for the past year the Securities and Exchange Commission (“SEC”) has also been investigating Woodbridge. Specifically, according to a publicly available court filing, the SEC “[i]s investigating the offer and sale of unregistered securities, the sale of securities by unregistered brokers and the commission of fraud in connection with the offer, purchase and sale of securities.”

In furtherance of the investigation, on January 31, 2017, the SEC issued a subpoena to Woodbridge (“Subpoena”). Under the Subpoena, Woodbridge was to provide the SEC with, among other things, “[a]ll non-privileged emails from January 1, 2012 through the date of the Order which were sent to, sent from, or received by: (1) Robert Shapiro… (2) Dayne Roseman; and (3) Nina Pedersen.” Dayne Roseman is listed on the Woodbridge website as a Managing Director and Ms. Pedersen serves as Woodbridge’s Comptroller.

In March 2017, Mr. Shapiro’s attorney, Ryan O’Quinn, formally responded to the SEC’s Subpoena. Through a letter to the SEC, counsel for the Woodbridge President invoked his Fifth Amendment right against self-incrimination: “Upon consideration of the SEC’s investigative subpoenas and a review with counsel of the individual rights afforded by the United States Constitution, Mr. Shapiro will rely on his constitutional privilege to refuse to be a witness against himself.”

It is worth noting that Woodbridge itself does not claim that its employees have a valid Fifth Amendment privilege with respect to their emails pertaining to the company, and for good reason given the collective entity doctrine. As the Supreme Court noted in Braswell v. United States, 487 U.S. 99, 104 (1988): the “collective entity rule… has a lengthy and distinguished pedigree.” Put simply, the common law collective entity rule holds that the Fifth Amendment privilege against self-incrimination does not apply to corporations and other collective entities, only to individuals. By extension, individuals acting on behalf of a corporate entity and in furtherance of corporate business and affairs, “[w]hen acting as representatives of a collective group, cannot be said to be exercising their personal rights and duties, nor be entitled to their purely personal privileges.” Braswell, 487 U.S. 99 (1988) quoting United States v. White, 322 U.S. 694 (1944).

On September 19, 2017, United States District Judge Cecilia M. Altonaga entered an Order granting the SEC’s Application to Enforce an Administrative Subpoena against Woodbridge. Thereafter, in early October 2017, counsel for Woodbridge informed the SEC that the document production in response to the subpoena “[i]ncluded only emails of Dayne Roseman’s Woodbridge email address.” Further, according to court filings, Woodbridge’s counsel informed the SEC that “[t]here were no responsive documents in the Woodbridge email addresses of Robert Shapiro or Nina Pedersen.” Additionally, Respondent’s counsel informed the SEC that “[M]r. Shapiro and Ms. Pedersen refused Woodbridge’s request that they either give Woodbridge access to their AOL accounts or consent to AOL providing that information to Woodbridge.”

In light of Woodbridge’s noncompliance with the Subpoena, on October 31, 2017, the SEC proceeded to file a Motion for Contempt of Court (“Motion”) in the Southern District of Florida against Woodbridge “[f]or its failure to abide by the Court’s Order on SEC’s Application to Enforce Administrative Subpoena Against Woodbridge….” Through this application to the Florida federal district court, the SEC is seeking full compliance on its Subpoena to force an order to obtain emails and documents related to 235 Woodbridge-affiliated limited liability corporations. The SEC has described the information sought pursuant to the Subpoena as critical to its investigation.

Through court filings, the SEC has asserted that the 235 LLCs are, in fact, “[i]nterwoven into the structure of the products Woodbridge offers for investment.” Of significance, the SEC believes that these companies are “[o]wned and/or controlled by Woodbridge’s President, Robert Shapiro.” Further, the SEC has stressed that the Subpoena seeks information that is not otherwise able to be obtained: “[W]hile other documents produced in the investigation indicate that Shapiro signs on behalf of the LLCs as a Manager, only the information sought by the subpoenas can definitively establish the ownership structure. Neither Colorado nor Delaware make such ownership information public, and of course the bank records are not publicly available. Moreover, Shapiro has asserted his Fifth Amendment privilege, thus forcing the Commission to establish these facts from other sources.”

At this time, Woodbridge reportedly continues to sell securities. Some of the issuers of Woodbridge securities include the following entities:

• WMF Management, LLC;
• Woodbridge Group of Companies, LLC;
• Woodbridge Mortgage Investment Fund 1, LLC;
• Woodbridge Mortgage Investment Fund 2, LLC;
• Woodbridge Mortgage Investment Fund 3, LLC;
• Woodbridge Mortgage Investment Fund 4, LLC;
• Woodbridge Mortgage Investment Fund PA, LLC;
• Woodbridge Group of Companies, LLC (d/b/a Woodbridge Wealth).

Financial advisors, and by extension their brokerage firm, have a duty to perform adequate due diligence on any investment recommended to customers, including private placement offerings pursuant to Regulation D. In addition, financial advisors have a duty to disclose the risks associated with any investment, and moreover, to conduct a suitability analysis to determine if an investment meets an investor’s stated investment objectives and associated risk profile.

Depending on their individual circumstances, Woodbridge Mortgage Investment Fund investors may be able to recover losses through FINRA arbitration or litigation. Woodbridge investors may contact the attorneys at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

The U.S. Securities and Exchange Commission (“SEC”) obtained an order on September 21, 2017 requiring the Woodbridge Group of Companies LLC (“Woodbridge”), of Sherman Oaks, California, to produce the documents of several company executives and employees, including the President and CEO. This order reportedly relates to an SEC investigation of Woodbridge.

The SEC is reportedly investigating whether Woodbridge and others have violated or are violating the antifraud, broker-dealer, and securities registration provisions of the federal securities laws in connection with Woodbridge’s receipt of more than $1 billion of investor funds. According to the SEC’s application and supporting papers filed in federal court in Miami on July 17, 2017, investors from around the country may have been affected.

On January 31, 2017, in furtherance of the SEC’s probe into Woodbridge, SEC staff in the Miami Regional Office reportedly served Woodbridge with a subpoena seeking the production of electronic communications that the company maintained relating to Woodbridge’s business operations, as well as other documents. Court papers filed by the SEC allege that the company has failed to produce any relevant communications in response to the subpoena, including those of three high-level Woodbridge officials, despite being legally required to make the production. The Court overruled Woodbridge’s objections and ordered the documents produced.

Woodbridge’s entities or mortgage funds (which are not necessarily subject to the Court order referenced above) include the following:

• WMF Management, LLC;
• Woodbridge Group of Companies, LLC;
• Woodbridge Mortgage Investment Fund 1, LLC;
• Woodbridge Mortgage Investment Fund 2, LLC;
• Woodbridge Mortgage Investment Fund 3, LLC;
• Woodbridge Mortgage Investment Fund 4, LLC;
• Woodbridge Mortgage Investment Fund PA, LLC;
• Woodbridge Group of Companies, LLC (d/b/a Woodbridge Wealth)

Among the many risks associated with investing in securities through a private placement is the potential for fraud or related misconduct. As described above, in order for unregistered securities to be sold in compliance with federal and applicable state securities laws, in nearly all instances an exemption to registration must apply. With respect to Woodbridge, it does not appear that the various fund offerings were recommended to investors as exempt securities through a permissible private placement offering.

If you have purchased any of the Woodbridge Notes and have suffered losses, you may be able to recover these losses in FINRA arbitration. To find out more about your legal rights and options, contact a securities arbitration attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

As recently reported, the Colorado Division of Securities (“Division”) is reviewing Woodbridge Mortgage Investment Funds 1, 2, 3, and 3A (collectively, the “Woodbridge Funds”) and related entities in connection with possible sales of unregistered securities. The Woodbridge Funds are offered by Woodbridge Wealth of Sherman Oaks, CA, through a nationwide network comprised primarily of independent broker-dealers and financial advisors. In addition to its investigation into the Woodbridge Funds, the Division is reportedly also conducting a parallel investigation into other individual named Respondents, including James Campbell, Jr. of Woodland Park, CO, Timothy McGuire of Highlands Ranch, CO, and Ronald Caskey of Firestone, CO.

The Division is focused on possible Colorado securities violations stemming from the alleged sale of unregistered securities (that were not exempt from registration), the alleged solicitation of investments in the Woodbridge Funds by unlicensed representatives, as well as alleged fraudulent statements and omissions of material fact concerning sales of the Woodbridge Funds to Colorado investors. The Division has alleged that the named Respondents — Messrs. Campbell, McGuire and Caskey — have raised approximately $57 million in investor capital from approximately 450 Colorado residents, and further, continue to solicit and advertise to potential investors through both online and radio advertisements. Of note, Ronald Caskey bills himself as a “finance professional” on his website, with a focus on retirement planning. Mr. Caskey hosts the Ron Caskey Radio Show and Bible Views Radio Show on stations in Denver, CO, Colorado Springs, CO, in addition to Evansville, IN.

The Division is reportedly reviewing marketing so-called “First Position Commercial Mortgages” (or “FPCMs”) to various investors through issuing promissory notes in exchange for investments that backed certain hard money loans secured by commercial real estate. The Woodbridge Funds allegedly hired Messrs. Campbell, McGuire and Caskey as sales agents in Colorado, despite the fact that none of these named Respondents were/are licensed to solicit or sell securities. Moreover, the Division has alleged that the FPCM’s, although secured by notes and thus falling within the definition of a security, are neither registered as a security, nor exempt from registration. Other allegations concerning reported sales of unregistered securities by Woodbridge are reportedly being reviewed by state regulators in Massachusetts, Texas, and Arizona.

In reviewing Woodbridge, the Division has reportedly focused on the lack of proper registration (of the FPCMs as securities), lack of proper licensure of the named Respondents, qualification of the fund managers of the Woodbridge Funds, and the ability of the respective funds to pay back investors in the event of a default(s) on an underlying commercial loan(s).

Attorneys at Law Office of Christopher J. Gray have significant experience handling cases concerning unregistered securities and private placements. If you have invested in any of the Woodbridge Funds, or otherwise purchased a First Position Commercial Mortgage through investing in a Woodbridge promissory note, from a FINRA-registered stockbroker or financial advisor, or were steered into making such an investment by a stockbroker or financial advisor, you may be able to recover investment losses in FINRA arbitration. To find out more about your legal rights and options, contact a securities arbitration attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

The President of a California group of companies known as Woodbridge that has previously been accused of selling unregistered securities by state securities regulators, Robert Shapiro, has reportedly invoked his Fifth Amendment right against self-incrimination in a letter to the Securities and Exchange Commission (SEC). A March 27, 2017 letter to the SEC from Shapiro’s attorney Ryan O’Quinn, Esq., reportedly stated that “Upon consideration of the SEC’s investigative subpoenas and a review with counsel of the individual rights afforded by the United States Constitution, Mr. Shapiro will rely on his constitutional privilege to refuse to be a witness against himself.”

Woodbridge Wealth, a California-based firm, is a successor company to Woodbridge Structured Funding, LLC, and sells structured financial products to investors, often through intermediary brokers. These sales have resulted in certain actions by state regulators. For example, in April of 2017, the Pennsylvania Bureau of Securities Compliance and Examinations entered into an agreement with Woodbridge Wealth, to settle allegations of securities industry misconduct arising out of sales of complex structured settlement products that Pennsylvania regulators alleged were unregistered securities. In another example, in May of 2016, the Financial Industry Regulatory Authority (FINRA) suspended Frank John Capuano (CRD#: 844182), a registered broker from western Massachusetts, after he was alleged to have improperly sold Woodbridge Wealth notes to investors while employed as a registered representative of Royal Alliance Associates in Holyoke, Massachusetts. Finally, in May of 2015, Massachusetts state regulators charged a non-registered individual named Charles Nilosek and his firm, Position Benefits, LLC, with fraud. These charges were brought bssed on the regulators’ allegations that the firm was marketing and selling unregistered securities to vulnerable elderly investors. These complex securities were allegedly sold to retirees as having a guaranteed return, but in fact were complex unregistered securities with no guaranteed return and the potential to create substantial principal losses.

Woodbridge, based in California, has reportedly raised over $1 billion from investors. Despite the regulatory actions, Woodbridge reportedly continues to sell securities. Some of the issuers of Woodbridge securities are the following:

* WMF Management, LLC

* Woodbridge Group of Companies, LLC

* Woodbridge Mortgage Investment Fund 1, LLC

* Woodbridge Mortgage Investment Fund 2, LLC

* Woodbridge Mortgage Investment Fund 3, LLC

* Woodbridge Mortgage Investment Fund PA, LLC

* Woodbridge Group of Companies, LLC (d/b/a Woodbridge Wealth)

As members and associated persons of FINRA, brokerage firms and their financial advisors must ensure that adequate due diligence is performed on any investment that is recommended to investors- including private placements under Regulation D. Further, firms and their brokers must ensure that investors are informed of the risks associated with an investment, and must conduct a suitability analysis to determine if an investment meets an investor’s stated investment objectives and risk profile. Either an unsuitable recommendation to purchase an investment or a misrepresentation concerning the nature and characteristics of the investment may give rise to a claim against a stockbroker or financial advisor.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience in representing investors who have incurred losses in connection with private placement offerings, including investments in oil and gas drilling funds and hedge funds. Investors with questions about losses in Woodbridge investments may contact our office at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

Recently, the Securities and Exchange Commission (SEC) requested documents form a group of companies known as Woodbridge that has previously been accused of selling unregistered securities by state securities regulators. The SEC reportedly has now asked a Miami federal judge to enforce subpoenas against nearly 250 companies affiliated with Woodbridge as part of the SEC’s investigation into whether “the company is perpetrating a fraud on its investors.”

The SEC also recently disclosed its ongoing investigation into Woodbridge’s receipt of more than $1 billion in investor funds in connection with securities offerings including a security known as the First Position Commercial Mortgage (“FPCM”), which the company describes as “[a] private third-party loan to Woodbridge [which] provides higher returns with shorter terms secured by commercial real estate.” In connection with FCPMs, investors reportedly loan money to Woodbridge, which says it uses those funds to acquire properties and in return pays investors a 5% annual return. Woodbridge also raises money using investment offerings through entities such as Woodbridge Mortgage Investment Fund III, LLC.

The SEC’s investigation, which began in September 2016, reportedly is focused on “possible significant violations of the securities laws,” including “the offer and sale of unregistered securities, the sale of securities by unregistered brokers, and the commission of fraud in connection with the offer, purchase, and sale of securities.” The recent round of subpoena requests reportedly began after Woodbridge failed to cooperate with less formal requests for documents by the SEC.

The 236 LLC subpoenas requested by the SEC reportedly sought basic information about the formation, ownership and bank account information about the Woodbridge-linked LLCs, in order to garner further insight into their affiliation and connection with Woodbridge and its President, Robert Shapiro.

Woodbridge, based in California, has reportedly raised over $1 billion from investors. Despite the regulatory actions, Woodbridge reportedly continues to sell securities. Some of the issuers of Woodbridge securities are the following:

* WMF Management, LLC

* Woodbridge Group of Companies, LLC

* Woodbridge Mortgage Investment Fund 1, LLC

* Woodbridge Mortgage Investment Fund 2, LLC

* Woodbridge Mortgage Investment Fund 3, LLC

* Woodbridge Mortgage Investment Fund PA, LLC

* Woodbridge Group of Companies, LLC (d/b/a Woodbridge Wealth)

As members and associated persons of FINRA, brokerage firms and their financial advisors must ensure that adequate due diligence is performed on any investment that is recommended to investors- including private placements under Regulation D. Further, firms and their brokers must ensure that investors are informed of the risks associated with an investment, and must conduct a suitability analysis to determine if an investment meets an investor’s stated investment objectives and risk profile. Either an unsuitable recommendation to purchase an investment or a misrepresentation concerning the nature and characteristics of the investment may give rise to a claim against a stockbroker or financial advisor.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience in representing investors who have incurred losses in connection with private placement offerings, including investments in oil and gas drilling funds and hedge funds. Investors may contact our office at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.